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Tax changes 'to hit middle incomes'

Tax changes 'to hit middle incomes'

5 min read

May 3, 2011

Middle income families on £40,000 to £50,000 will be hit by planned tax changes, and commercial interests will also be affected badly, tax experts said.

Families in this bracket will face a "considerable increase" in tax payments due to changes in tax credits and child benefit, said the Chartered Institute of Taxation.

Many households where the only earner was a higher-rate taxpayer already had a below-average income, being in the fourth income decile, said the body.

The institute said: "The effective freezing of the higher-rate threshold, the proposed withdrawal of child benefit from households containing a higher-rate taxpayer, and the reductions in working tax credit - particularly the childcare element - will result in those households falling further down the income distribution."

It warned that these changes would lead to middle-income households being "squeezed" proportionately more than those on higher incomes who did not receive tax credits. The group added that taking low-income households out of the income tax net by raising the personal allowance would not necessarily make their households better off, once their loss of housing benefit and council tax benefit were also taken into account.